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Here's how the financial markets typically do in September: It's not pretty

Key Points
  • The Dow Jones Industrial Average has averaged a loss of 0.75% in September over the past 30 years, CNBC analysis using Kensho shows.
  • The S&P 500 does not fare much better either. In September, the broad index loses an average of 0.47%.
  • This September could be especially tough for investors as U.S.-China trade tensions remain high while the U.S. and global economies show signs of slowing down.
A trader wipes his eyes as he watches stock prices at the New York Stock Exchange in New York.
Don Emmert | AFP | Getty Images

Stocks could be in for a rough time in September if history is any indication.

The Dow Jones Industrial Average has averaged a loss of 0.75% in September over the past 30 years, CNBC analysis using Kensho shows. In fact, the 30-stock average trades positive just 47% of the time in September. The S&P 500 does not fare much better either. In September, the broad index loses an average of 0.47% and trades positive just 52% of the time. The Nasdaq Composite averages a marginal gain in September.

This September could be especially tough for investors as U.S.-China trade tensions remain high while the U.S. and global economies show signs of slowing down.

"The global macroeconomic picture continues to show fragility," Katie Nixon, CIO at Northern Trust Wealth Management, wrote in a note. "We expect overall growth to trend lower under the weight of growing trade uncertainty."

VIDEO7:1807:18
Portfolio manager explains what to expect from markets in September

A 15% U.S. tariff on about $112 billion in Chinese goods took effect this weekend, in effect adding a tax on about two-thirds of consumer goods coming from China. Additional tariffs were also implemented on U.S. goods entering China. This is the latest escalation in a trade war that has been going on since last year.

Meanwhile, the U.S. manufacturing sector contracted in August for the first time since early 2016, according to a survey from the Institute for Supply Management. Manufacturing activity in Europe also contracted last month, IHS Markit data shows.

September lived up to its tough reputation on Tuesday, the first trading day of the month, as investors digested the new tariffs along with the weak economic data. The Dow and Nasdaq both fell more than 1% while the S&P 500 slid 0.7%.

Investors seeking safety from the volatility should look to gold. The precious metal has averaged a gain of 1.7% in September over the past three decades and trades positive two-thirds of the time, according to Kensho.

September has been a mixed bag for stocks over the past five years. In 2018 and 2017, the S&P 500 has posted returns of 0.4% and 1.9%, respectively. However, the index dropped 2.6% in 2015 and 1.6% in 2014. In 2016, the S&P 500 posted a slight loss. The S&P 500 had a strong September in 2013, rallying nearly 3%.

Telecoms and health care outperform, materials and tech slide

At the stock sector level, telecommunications and health care have outperformed in September over the past 30 years. The sectors average a return of 1.1% and 0.7%, respectively. Telecoms and health care also trade positive nearly 60% of the time in September, Kensho data shows. Energy, consumer staples and utilities also average slight gains for September.

But investors who are heavily exposed to materials and tech stocks should brace themselves. Materials have averaged a loss of 2% in September while tech loses an average of nearly 1%.

Consumer discretionary stocks — which include Amazon and Home Depot — fall 0.8% on average. Financials and industrials average slight losses in September.

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